Becoming a freelancer takes a lot of guts. Especially if you're used to a consistent paycheck and a predictable yearly salary. Being a freelancer means it's completely up to you to figure out how to generate enough paychecks to provide you and your family the lifestyle you desire.
If you talk candidly about finances with other freelancers and ask them how much money they'd like to make this year, a common answer is, "as much as I can!" It's an honest answer as we'd all like to make as much as we can. But after my first couple years of freelancing I realized I needed to be more specific with my financial goals. I needed a plan.
Make a Plan
Without a yearly financial goal, and without a plan to track and meet that goal, it's easy for freelancers to burn themselves out. Here's why:
- They tend to work too many hours because they have no gauge of their financial health, and no financial data that tells them when it's OK to slow down.
- They're inclined to say "yes" to every project that comes along for fear of the unknown future, and for fear that the money they've already made may not have been portioned as wisely as it should've been.
- They don't know why or when to raise their rates because without a financial goal there's nothing to tell them their rates will or will not support their desired lifestyle long term.
- They don't know where to schedule in new projects based on a financial schedule, therefore they schedule based solely on available time, which usually leads back to the first bullet point of working too many hours.
- They don't charge enough for their projects because there's nothing to help them gauge what "enough" is, and as a consequence they cram too many projects in at a time.
- They don't take vacations because of the uncertainty of their current financial status and inability to forecast their financial future.
During my first couple years of freelancing I didn't have specific financial goals. I just wasn't sure how much I could make as a freelancer, so I simply decided to make as much as I could. As a result I experienced every one of the above bullet points.
Things started to turn around quickly when I took my first step towards financial stability as a freelancer. That step was coming up with my "big number."
The Big Number
The first thing I did to get myself off the hamster wheel was to decide exactly how much revenue I would need to generate in a year in order to live the lifestyle I desired. This yearly revenue included everything I needed to run the business, pay my bills, take vacations, grow my savings, pay for health insurance, contribute to retirement, etc. This is the freelancer's "big number." It's the amount of yearly revenue that would meet a freelancer's every need (including the need to save). It's the first step to eliminating the stress, burnout, and uncertainty described in the bullet points above.
Every other aspect of a freelancer's yearly financial plan works backwards from the big number. Because once you know your big number you can now break your year into manageable, bite-sized pieces.
You'll cease to constantly work too many hours based on fear of the unknown. Your financial plan will assist you in spreading out your work into manageable chunks.
You'll be able to strategically schedule your projects in the context of smaller, short term financial goals that keep you on track to meeting your ultimate goal of the big number.
You'll quickly know if you need to raise your rates because you now have a gauge to test against that goes beyond simply the amount of time you have to give. It's a financial gauge that's linked directly with your goal of living a specific lifestyle.
You'll be able to take time off guilt-free because the numbers won't lie. You'll see how far ahead or behind you are. And even if you are behind and take time off at least you have your work cut out for you when you return. You'll know where you stand.
Harpoon Is the Plan
This is what Harpoon is all about. It's the revenue-tracking system, the plan, that leads a freelancer to accomplishing their goal of the big number. Harpoon is being built to help freelancers live the lifestyles they desire without the stress and burnout of trying to make "as much as you can." It's a refreshing way to live!
If you'd like to be first in line to try out Harpoon be sure to sign up on our mailing list!